Compare Family Income Benefit Insurance Policies

The Problem with Term Life Insurance

In the event of a life claim a term insurance policy normally pays out a lump sum to help the remaining carer look after the family. However this lump sum would normally be invested to provide enough income to look after the dependents. This is easier said than done and depends on investment performance but also the discipline of the remaining partner. Family Income Insurance hopes to prevent this from happening.

Lump Sums Can Get Spent

Unfortunately most people are not experts on investing and if a person comes into a lump sum paid out for the loss of a spouse, they are likely to deplete the funds quicker than expected. If the remaining spouse has children to provide for and the lump sum has been spent then this can lead to financial difficulties for the family. A sum of £100,000 or even £200,000 may sound a lot but after home improvements, new cars etc the lump sum can soon get depleted leaving a short fall of income for the family.

The Family Income Benefit Option

Another option is the Family Income Benefit Insurance Policy. One would calculate how much income they would need if either partner were to die. For example if they needed £2000 per month the plan would pay this as tax free cash on the death of one of the partners. The amount needed per month and the length of the payment term is determined at the application stage. The main advantage is that the income is paid in stages and thus the temptation to spend the sum assured is not present. Family income benefit insurance can often be cheaper than an equivalent level term insurance policy. The reason is because the cover paid out actually decreases throughout the term, as even though the monthly income remains the same the time left until the term ends gets shorter as time goes on.

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